According to Lady Falkender's solicitors, Carter Ruck: "The programme claimed – wrongly – that it was Lady Falkender, rather than the Prime Minister himself, who compiled Lord Wilson's Resignation Honours List in 1976 and that, in doing so, she included the names of individuals who had assisted her personally or from whom she hoped to receive assistance personally in future.

"It also suggested – again wrongly – that Lady Falkender had had a brief adulterous affair with Lord Wilson and had subsequently used this to blackmail him."

The Lavender List was broadcast on BBC Four on 1 March 2006. According to Carter Ruck, the programme will now never be broadcast on terrestrial TV under the terms of the libel settlement.

Lady Falkender said: "I am very glad that matters have been resolved satisfactorily. A lot of nonsense has been written about the 1976 Resignation Honours List – the so called 'Lavender List' – and my claim against the BBC has, I hope, given me an opportunity to nail the lie once and for all.

"As Lord Wilson always made clear throughout the period after he left office, and as I have myself always made clear, the 1976 List was his own work and included only those individuals he himself believed ought to be honoured. My involvement in the preparation of the List was no different to that of any other Political Secretary and the suggestion that I had means at my disposal of imposing my wishes upon Lord Wilson is simply untrue.

"The BBC's programme presented a picture which, in a whole host of respects, bore no resemblance whatsoever to the reality of Lord Wilson's final administration. In doing so, it harmed not only my reputation but also that of one of this country's most able and successful Prime Ministers, not to mention that of Lady Wilson. I hope that the terms of settlement into which the BBC has now been forced to enter go some way towards redressing the balance."

BBC has also apologised to Lady Falkender and agreed to meet her legal costs.